Look Out Below :Oil prices hit 11-year low as global supply balloons ( Reuters plus Bloomberg charts) )

LONDON (Reuters) – Brent crude oil prices hit their lowest in more than 11 years on Monday, driven down by a relentless rise in global supply that looks set to outpace demand again next year.

Oil production is running close to record highs and, with more barrels poised to enter the market from nations such as Iran, the United States and Libya, the price of crude is set for its largest monthly percentage decline in seven years.

Brent futures (LCOc1) fell by as much as 2 percent to a low of $36.05 a barrel on Monday, their weakest since July 2004, and were down 49 cents at $36.39 by 1332 GMT.

While consumers have enjoyed lower fuel prices, the world’s richest oil exporters have been forced to revalue their currencies, sell off assets and even issue debt for the first time in years as they struggle to repair their finances.

OPEC, led by Saudi Arabia, will stick with its year-old policy of compensating for lower prices with higher production, and shows no signs of wavering, even though lower prices are painful to its poorer members.

The price of oil has halved over the past year, dealing a blow to economies of oil producers such as Nigeria, which faces its worst crisis in years, and Venezuela, which has been plunged into deep recession.

Even wealthy Gulf Arab states have been hit. Last week Saudi Arabia, Kuwait and Bahrain raised interest rates as they scrambled to protect their currencies.

NO LIGHT AT THE END OF THE TUNNEL

“With OPEC not in any mood to cut production … it does mean you are not going to get any rebalancing any time soon,” Energy Aspects chief oil analyst Amrita Sen said.

“Having said that, long term of course, the lower prices are today, the rebalancing will become even stronger and steeper, because of the capex (oil groups’ capital expenditure) cutbacks … but you’re not going to see that until end-2016.”

Reflecting the determination among the biggest producers to woo buyers at any cost, Russia now pumps oil at a post-Soviet high of more than 10 million barrels per day (bpd), while OPEC output is close to record levels above 31.5 million bpd.

Oil market liquidity usually evaporates ahead of the holiday period, meaning that intra-day price moves can become exaggerated.

On average, in the last 15 years, December is the month with least trading volume, which tends to be just 85 percent of that in May, the month which sees most volume change hands.

Brent crude prices have dropped by nearly 19 percent this month, their steepest fall since the collapse of failed U.S. bank Lehman Brothers in October 2008.

U.S. crude futures (CLc1) were down 26 cents at $34.47 a barrel, their lowest since 2009.

“Really, I wouldn’t like to be in the shoes of an oil exporter getting into 2016. It’s not exactly looking as if there is light at the end of the tunnel any time soon,” Saxo Bank senior manager Ole Hansen said.

Investment bank Goldman Sachs (GS.N) believes it could take a drop to as little as $20 a barrel for supply to adjust to demand.

Thanks to the shale revolution, the U.S. has been pumping a lot of oil on the cheap, helping to drive down prices to six-year lows and to fill up storage tanks. Indeed, we’re running out of places to put it.

LOOK OUT BELOW

The U.S. has 490 million barrels of oil in storage, enough to keep the country running smoothly for nearly a month, without any added oil production or imports. That inventory doesn’t include the government’s own Strategic Petroleum Reserve, to be used in the now highly unlikely event of an oil shortage. Nor does it include oil waiting at sea for higher prices. The lower 48 states also boast about 4 trillion cubic feet of natural gas in storage — a far bigger cushion than Americans have needed so far during a very warm winter.

For their part, OECD countries (including the U.S.) have nearly 3 billion barrels of oil in storage — or enough to keep factories lit and houses heated in those countries for two months, cumulatively, without added production or imports.

The glut is going to continue worldwide unless some major producers stop pumping. OPEC announced recently that it was abandoning output limits.

So what happens when there’s too much oil to store? Producers will try to rid themselves of it by cutting prices. In that scenario, the price would plummet so far that some producers would shutter their wells altogether — which is, perhaps, the only way that the oil glut will ease.

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Braggin’ Rights : Oil Continues To Curse ( your) Portfolio Results

 

My rant – the  curse of Cassandra :

Cassandra, daughter of the king and queen, in the temple of Apollo, exhausted from practising, is said to have fallen asleep – when Apollo wished to embrace her, she did not afford the opportunity of her body. On account of which thing :

when she prophesied true things, she was not believed.

I have written :

GET YOUR PORTFOLIO THE HELL OUT OF ENERGY : PRAYER ISN’T AN INVESTMENT STRATEGY  Dec.17,2015

Managed Accounts Year End Review and Forecast

in part

Oil/ Energy

I am very happy for the call in natural gas prices – out at $12 and into oil. When oil was above $100 we lessened positions and that is our saving grace in the past two weeks. We are not bottom feeders and will wait for a turn in the market before reentering drillers or producers.

On Friday November 27th, crude oil prices dropped to below $72 and the slide has continued into the weekend, with Brent crude oil at $70.15 as I write this post. Shares of major oil companies traded down on Friday. Our former energy sector holdings are down another between 4% and 11%, including SDRL, which dropped another 8% following Wednesday’s 23% plunge..

OIL Sector Update Dec. 20,2015

  • Official data show Saudis shipped more crude amid global glut
  • Saudi output exceeded 10 million barrels a day for ninth month

 

Saudi Crude Exports Rose in October to Most in Four Months

Saudi Arabia boosted crude exports in October to the highest level in four months, as the world’s biggest oil exporter added barrels to a worldwide supply glut that has contributed to a slump in prices.

Saudi shipments rose to 7.364 million barrels a day in the month from 7.111 million in September, according to the latest figures from the Joint Organisations Data Initiative. The monthly exports were the most since June and 7 percent higher than in October 2014, the data released on Sunday showed. JODI is an industry group supervised by the Riyadh-based International Energy Forum.

Saudi Arabia produced 10.28 million barrels a day in October, up from 10.23 million in September, the JODI figures showed.

Saudi Arabia led OPEC to decide on Dec. 4 to abandon the group’s limits on output amid efforts to squeeze higher-cost producers such as Russia and U.S. shale drillers out of the market. The Organization of Petroleum Exporting Countries had set a production target almost without interruption since 1982, though member countries often ignored and pumped well above it. The oversupply has pushed the price of benchmark Brent crude to almost a seven-year low and triggered the worst slump in the energy industry since the 2008 global financial crisis.

Brent for February settlement dropped 18 cents, or 0.5 percent, on Friday to $36.88 a barrel on the London-based ICE Futures Europe exchange. The crude grade has tumbled 36 percent this year.

Saudi Arabia pumped 10.33 million barrels a day in November, exceeding 10 million barrels in daily output for the ninth consecutive month, according to data compiled by Bloomberg. The Saudis have stuck to their one-year-old view that any output cuts won’t succeed in supporting prices unless big producers outside OPEC, including Russia and Mexico, also participate.

Crude exports fell in October from Iraq and Kuwait, OPEC’s second- and fourth-biggest producers, respectively, according to JODI. Iraq shipped 2.708 million barrels a day, down from 3.052 million barrels a day in September for the country’s fourth consecutive monthly decline, the data showed. Kuwait’s exports dropped to 1.905 million barrels a day in October from 2.008 million in the previous month, JODI said.

Iran, the fifth-biggest supplier in OPEC, exported 1.395 million barrels a day of crude in October, a marginal increase from 1.39 million in September, JODI figures showed

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Similar to wise buying decisions, exiting certain underperformers at the right time helps maximize portfolio returns. Selling off losers can be difficult, but if both the share price and estimates are falling, it could be time to get rid of the security before more losses hit your portfolio.

 

Encana -OIl and Natural Gas – Prayer Is Not A Strategy : Get Out

Too little , too late

The company will outspend cash flow next year, with its cash flow of $1 billion to $1.2 billion reflecting a cash shortfall of $550 million, based on U.S. crude prices of US$50 per barrel and US$2.75 natural gas prices.

Our position: Analysts and the company executives are sleep walking past the graveyard.

Encana Corp slashes dividend and cuts capital spending

  • from Tuesday Financial Post

Encana Corp. is planning to “reset” its dividend next year as it adjusts to a protracted downturn that has seen oil prices decline to a six year-low.

The Calgary-based company said it is cutting its dividend by 79 per cent to six cents from 28 cents. The company’s stock tumbled more than eight per cent on the Toronto Stock Exchange on Monday.

“This reset better aligns our dividend with our cash flow or balance sheet and recognizes the very high quality investment options in our portfolio,” CEO Doug Suttles told analysts during a conference call outlining the company’s 2016 capital program.

Canada’s oil and gas sector is in the middle of an austerity drive, as one of the world’s highest-cost jurisdictions comes to terms with prices that have dipped below US$35 per barrel and have lost more than 50 per cent of their value in the space of a year.

The industry has lost 35,000 jobs since OPEC members started driving down prices by raising output in a bid to squeeze out high cost-producers in November 2014.

Canadian companies have responded by reducing headcounts, shelving projects, reining in capital expenditure and cutting dividends to protect their balance sheets — and there may be little respite in the new year.

Encana plans to cut its capital spending by 27 per cent next year to between US$1.5 billion to US$1.7 billion, with half the budget allocated to its Permian basin straddling Texas and New Mexico.

Indeed, the company plans to raise investment in its Permian operations to around $800 million from $700 million a year earlier, but will throttle back in Eagle Ford, and in the Canadian shale plays of the Duvernay and Montney, as it focuses on the most cost-effective play in its portfolio.

While the capital budget was in line with expectations, both total production and liquids production fell short of expectations, which will likely see our cash flow estimates come down with leverage increasing further,” wrote Kyle Preston, an analyst with National Bank Financial Inc. The analyst sees the company’s announcement as “negative,” and cut its price target to US$8 from US$10.

The company will outspend cash flow next year, with its cash flow of $1 billion to $1.2 billion reflecting a cash shortfall of $550 million, based on U.S. crude prices of US$50 per barrel and US$2.75 natural gas prices.

“While we do not see any near-term risk of breaching any debt covenants, we believe the budget may have to be revised down again if commodity prices remain at or near current levels for an extended period,” Preston said.

NONSENSE_ look where prices are – don’t base analysis on dreams:

Crude Oil & Natural Gas

INDEX UNITS PRICE CHANGE %CHANGE CONTRACT TIME ET 2 DAY
USD/bbl. 35.71 -1.64 -4.39% JAN 16 11:25:36
USD/bbl. 37.14 -1.31 -3.41% JAN 16 11:24:40
JPY/kl 28,540.00 -870.00 -2.96% MAY 16 11:26:00
USD/MMBtu 1.79 -0.03 -1.70% JAN 16 11:25:41

Read More on The Sector Sea Change at http://www.youroffshoremoney.com

 

Christine Till's photo.
UPDATE:

Data from the U.S. Energy Information Administration showed a growing glut, with crude inventories up 4.8 million barrels last week. Analysts in a Reuters poll had forecast a decrease of 1.4 million barrels.

“Only the staunchest contrarian could derive anything bullish out of that report,” said Peter Donovan, broker at Liquidity Energy in New York.

“The actual numbers were more bearish than all expectations, as well as more bearish than the API report released last night,” he said.

Iraq Crude Floods U.S. Market

  • Exxon Mobil Corporation (XOM)

    NYSE

    81.97 Down 0.38(0.46%) 12:27PM EST – NYSE Real Time Price
    Prev Close: 82.35
    Open: 82.41
    Bid: 81.81 x 700
    Ask: 81.82 x 500
    1y Target Est: 83.35
    Beta: 1.01531
    Next Earnings Date: N/A
    Day’s Range: 81.5782.56
    52wk Range: 66.55 – 97.20
    Volume: 3,484,960
    Avg Vol (3m): 15,970,300
    Market Cap: 341.24B
    P/E (ttm): 17.31
    EPS (ttm): 4.73
    Div & Yield: 2.92 (3.90%)
    Quotes delayed, except where indicated otherwise. Currency in USD.
  • Sliding U.S. oil production reviving reliance on imports
  • Tanker owners benefit as long-distance trade route boosted
  • raq, the fastest-growing producer within the 12-nation group, loaded as many as 10 tankers in the past several weeks to deliver crude to U.S. ports in November, ship-tracking and charters compiled by Bloomberg show. Assuming they arrive as scheduled, the 19 million barrels being hauled would mark the biggest monthly influx from Iraq since June 2012, according to Energy Information Administration figures.The cargoes show how competition for sales among members of the Organization of Petroleum Exporting Countries is spilling out into global markets, intensifying competition with U.S. producers whose own output has retreated since summer. For tanker owners, it means rates for their ships are headed for the best quarter in seven years, fueled partly by the surge in one of the industry’s longest trade routes.
    November crude imports from Iraq will be highest in over three years
    November crude imports from Iraq will be highest in over three years

    “In the longer term, we expect the U.S. to have to increase imports next year by some 500,000 barrels to 800,000 barrels a day year on year,” Steve Sawyer, the head of refining at FGE, a consultant in London. “Given our projections for Iraqi output, it could well come from here.”

    Hunting for Buyers

    Iraq, pumping the most since at least 1962 amid competition among OPEC nations to find buyers, is discounting prices to woo customers. The U.S. may increasingly become one of them after its own output dropped by as much as 500,000 barrels a day since June. An increase in trade between the two would boost tanker owners. Deliveries take at least 57 percent longer than for those to Asia, the most popular destination.

    The tanker industry’s biggest ships earned an average of almost $76,500 a day so far in the fourth quarter, which would be the highest since mid-2008 if maintained through year-end, according to data from Clarkson Plc, the world’s biggest shipbroker.

    Shipowners have already seen the benefit of higher rates thanks in part to the longer-distance cargoes. Shares of Oslo-listed Frontline Ltd., led by billionaire John Fredriksen, rose 61 percent to $28.60 from the 2015 low in August. Euronav NV is up 25 percent from the year’s low in February.

    Gulf of Mexico

    The ships bringing the 19 million barrels include vessels that left Iraq’s Basra Oil Terminal and are currently signaling U.S. ports as their destination. There is also one vessel that went through Egypt’s Suez Canal and identified by shipbrokers as going to the U.S. All except one are very large crude carriers, the industry’s biggest vessels, sailing to terminals in the Gulf of Mexico.

    The U.S. is pumping 450,000 barrels a day less crude than during the peak in June. If all that oil were replaced by supplies from Iraq, it would require about seven supertankers each month.

    Iraq is among the least expensive places in the world to extract crude. Capital costs are about seven times cheaper than for light, tight oil suppliers in the U.S. when measured by fields’ daily plateau capacity, according to the International Energy Agency in Paris.

    West Texas Intermediate, the U.S. benchmark, fell $1.14 to $43.07 a barrel on the New York Mercantile Exchange at 12:05 p.m. local time. Brent, the global marker, lost $1.30 to $46.14.

    The Middle East country sells its crude at premiums or discounts to global benchmarks, competing for buyers with suppliers such as Saudi Arabia, the world’s biggest exporter. Iraq sold its Heavy grade at a discount of $5.85 a barrel to the appropriate benchmark for November, the biggest discount since it split the grade from Iraqi Light in May. Saudi Arabia sold at $1.25 below benchmark for November, cutting by a further 20 cents in December.

    “It’s being priced much more aggressively,” said Dominic Haywood, an oil analyst at Energy Aspects Ltd. in London. “It’s being discounted so U.S. Gulf Coast refiners are more incentivized to take it.”

Chesapeake :Downgraded To Junk at Fitch – Further Evidence The Energy Sector Slide Continues

 

( FROM Seeking Alpha)
Nov 6 2015, 17:45 ET | About: Chesapeake Energy Corporation (CHK) | By: Carl Surran, SA News Editor
Chesapeake Energy’s (NYSE:CHK) debt rating is cut further below investment grade, to BB- from BB, by Fitch Ratings; shares fell 2.6% in today’s trade, in line with other energy producers as crude oil prices fell and amid the higher likelihood of a Fed rate hike.

Fitch says CHK’s cash flow, liquidity and leverage profiles will be “notably weaker” than previous expectations because of persistently low oil and gas price realizations and heightened future reliance on asset sales to fund cash flow gaps; it also cites CHK’s increasingly limited ability to invest in its highest return assets in favor of operationally committed and shorter-cycle reserves.Fitch concedes that CHK’s size and scale relative to other high-yield E&P companies provides considerable financial flexibility.

and from Forbes

This Oil Bust Will Change The Energy Industry Forever

Although demand for oil and gas will continue for decades to come, it will gradually diminish as renewable energy sources rise. A lot could happen between then and now. The International Energy Agency (IEA) and many other credible parties continue to forecast that our growing world population from 7 billion people today to 9 billion by 2050 will need much more energy – in particular as most of these people will aspire a life like we have here in North America. So it is no wonder that Abdalla El-Badri, Secretary General of OPEC has recently said that if producers don’t invest in new oil and gas supply, we could see oil prices as high as $200 a barrel. On the other hand, there is Bob Dudley, CEO of BP , who believes we won’t see $100 oil again “for a long time”.

Innovation in the oil industry, particularly the North American revolution in the hydraulic fracturing of tight oil reservoirs, has changed oil supply dramatically. With smaller, more flexible capital-light projects and shorter lead times, fracking has enabled greater adaptability to volatile market conditions. The outlook for shale oil and gas could be just as strong in many places in the world. Even if the shale boom proves tough to replicate (due to factors such as regional differences in geology, regulation and incentives to land owners), in many cases bringing new technologies to mature fields will help keep supply up and dampen the increase in oil prices.

Sluggish demand is another important factor keeping oil prices from rising. Not just from disappointing growth in China, but also in North America. Car ownership in the Western world has started to drop in the past decade, especially among young people. Based on the early success of Tesla and arrival of car sharing companies like Car2Go and Uber, and the entry of Apple AAPL +0.83% and Google GOOGL +0.13%in the autonomous-driving car game, there’s reason to foresee a future where not everyone has a personally owned internal combustion engine at their disposal. Change is slow however: a truck or bus and many gasoline fueled cars sold today will of course drive somewhere in the world for the next 30 to 40 years. Hence, some demand for hydrocarbons will continue.

The financial sector is a third factor inhibiting the rise of oil prices. While we already see many financial institutions divesting from hydrocarbon stocks to the tune of $2.6 trillionbecause of social and environmental pressure, the recent speech by Bank of England Governor Mark Carney is further going to influence the willingness of large financial institutions to continue to invest in traditional hydrocarbon projects in the future. One of the most significant risks Carney focused on in his speech is transitionary cost, the cost of write-offs for traditional hydrocarbon assets if countries are indeed getting serious about phasing out hydrocarbons. Even while the target date for a 100% carbon free society is only 2100, we expect that policies will likely start having significant implications in the next decades. The message is that “Sustainable Innovation” may become key to future energy financings and that oil and gas companies will have to innovate much more than they do today in order to survive as energy-producing Fortune 500 companies in the decades to come.

 

Trading Alert : Oil Sector Is Not Yet At The Bottom

 

“This is the beginning, not the end, of the write-down process,” Paul Sankey, an energy analyst at Wolfe Research LLC, said on Bloomberg TV on Friday. “The biggest concern is that we’ll see weaker demand over the second half of the year.”

Exxon Mobil Corp. and Chevron Corp., the biggest U.S. energy producers, hunkered down for a prolonged stretch of weak prices after posting their worst quarterly performances in several years.

Exxon reported its lowest profit since 2009 as crude prices fell twice as fast as the world’s largest crude producer by market value could slash expenses. Chevron recorded its lowest profit in more than 12 years after the market rout forced $2.6 billion in asset writedowns and related charges.

Stung by the worst market collapse since the financial crisis of 2008, oil explorers are slashing jobs, scaling back drilling, canceling rig contracts and reducing or halting share buybacks to conserve cash. Chevron said the slump convinced it to lower its long-term outlook for crude prices.

“This is the beginning, not the end, of the write-down process,” Paul Sankey, an energy analyst at Wolfe Research LLC, said on Bloomberg TV on Friday. “The biggest concern is that we’ll see weaker demand over the second half of the year.”

Exxon cut share repurchases for the current quarter in half to $500 million after net income fell to $4.19 billion, or $1 a share, from $8.78 billion, or $2.05, a year earlier, the Irving, Texas-based company said in a statement on Friday. The per-share result was 11 cents lower than the average estimate of 20 analysts in a Bloomberg survey.

For Exxon, refinery profits fattened by lower costs for crude were more than offset by weaker results in the company’s primary business, oil and natural gas production, Exxon said. The company’s U.S. wells posted a $47 million loss.

Spending Cuts

Exxon reduced spending on major projects like floating crude platforms and gas-export terminals by 20 percent to $6.746 billion during the quarter, according to the statement. International crude prices fell 42 percent from the previous year to an average of $63.50 a barrel.

Chevron’s profit dropped to $571 million, or 30 cents a share, from $5.67 billion, or $2.98, a year earlier, the San Ramon, California-based company said in a statement. The per-share result was well below the $1.16 average estimate.

Chevron’s biggest business unit — oil and gas production – – posted a loss as the second-largest U.S. energy company recorded a $1.96 billion writedown on assets and another $670 million charge for taxes and projects suspended because they no longer make economic sense.

“The write-downs will get worse into the end of the year as companies complete their end-of-the-year SEC filings,” Sankey said. “The market still looks very over-supplied with oil and we’re in peak demand season globally.”

Pessimistic Outlook

Exxon Chairman and Chief Executive Officer Rex Tillerson was among the first oil-industry bosses to shrink spending as the crude rout began taking shape more than a year ago. After cutting the budget by 9.3 percent in 2014, this year’s reduction may exceed the original 12 percent target, the company disclosed during an April 30 conference call with analysts.

Tillerson, an Exxon lifer whose 10th year as CEO began in January, has been pessimistic about the prospects for an imminent oil-market rebound. On April 21, he told a Houston energy conference that the supply glut and low prices will persist “for the next couple of years” at least.

Those remarks proved prophetic: international crude prices that rose 45 percent between Jan. 13 and May 6 have since tumbled 21 percent, inaugurating the second oil bear market in 14 months.

“Chevron was a disaster; Exxon was a disappointment,” Fadel Gheit, an analyst at Oppenheimer & Co. In New York who rates the shares of both the equivalent of a hold and owns each. “A rising tide lifts all ships, but when the tide goes down, all ships go down.”

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Energy Sector Dealmaking On Pause- As Buyers Eye Bottom

Oil in Storage Rises More Than Expected Again

“You’re not going to lose anything by waiting,”

(Bloomberg) — When Whiting Petroleum Corp. put itself up for sale this month, the oil industry appeared on the brink of a deal surge that would dramatically redraw the energy landscape.

Instead, Whiting decided it was better off selling shares and borrowing more money to surmount a cash shortfall brought on by tumbling crude prices. The lesson? Takeover fever driven by the oil-market crash is yet to really heat up because share prices haven’t fallen as fast or hard as crude.
It may be later this year or early 2016 before buyout candidates resign themselves to a long-term market slump and lower valuations, said David Zusman, chief investment officer at Talara Capital Management LLC.
“Nobody wants to catch a falling knife,” said Chris Pultz, portfolio manager of a merger-arbitrage fund at Kellner Capital in New York. “The last thing anyone wants to do is price a deal now, only to have oil fall to $30 a barrel later on. There’s a lot of skittishness.”
Whiting, a potentially juicy prize as the biggest oil producer in North Dakota’s Bakken shale, isn’t the only one fending off bargain seekers. Tullow Oil Plc, an Africa-focused group seen as a perennial takeover target, earlier this month tapped lenders to restore its finances. In North America, Encana Corp., Noble Energy Inc., RSP Permian Inc. and Carrizo Oil & Gas Inc. have sold new shares, effectively blocking deals.
Lesser Evils
For oil producers squeezed by heavy debt and a collapse in crude prices below $50, issuing new shares and rolling over old loans, when given the choice, remain lesser evils than a corporate fire sale. So far this year, the oil and natural gas sector has seen deals worth nearly $1.9 billion, the lowest quarterly figure in at least five years, according to Bloomberg data. In the first quarter of 2014, energy deal making reached $27.9 billion.
“Every time there’s a market downturn, you always have this chorus of suggested interest in takeovers,” said Vincent Piazza, global energy research coordinator at Bloomberg Intelligence in New York. “In reality, few deals of any consequence occur.”
A disconnect between company valuations and the crude market is adding to buyers’ uncertainty. Since Dec. 15, stock values in an index of 20 U.S. producers have bounced back an average 7 percent, even as oil fell another 15 percent to $47.51 a barrel on Tuesday.
Second Half
The price crash was so swift that many companies may be waiting for the market to stabilize before agreeing to major acquisitions, said Osmar Abib, who leads the global energy practice for Credit Suisse Group AG.
“You’re going to see a much bigger flow of announcements in the second half of the year because by then, people will have adjusted to the new environment,” Abib said Tuesday in an interview.
Buyers and sellers need time to find common ground on valuations, Scott Sheffield, chief executive officer at Pioneer Natural Resources Co., said Tuesday in an interview at the Howard Weil Energy Conference in New Orleans.
“It’s going to take at least mid-summer or late in the year for oil prices to bottom and to start going up again and for people to develop their own views,” Sheffield said.
Much will depend on where oil prices settle. Sheffield said he sees a rebound to $60 a barrel by the end of the year, with prices ranging from $60 to $80 over the next five years. A $60 price over the long term will lead to more consolidation, he said.
Rising Rates
Another possible deal-driver: the availability of capital from loans and equity offerings may dry up, particularly if the U.S. Federal Reserve increases interest rates.
Dealmaking hasn’t completely ground to a halt. Whiting, based in Denver, paid $1.8 billion in stock and assumed $2.2 billion in debt in December to close on the purchase of Bakken rival Kodiak Oil & Gas Corp., a deal announced in July, when crude was still above $100 a barrel.
That same month, Spain’s Repsol SA agreed to pay $8.3 billion in cash and assume $4.66 billion in debt for Canada’s Talisman Energy Inc. The transaction has yet to close.
Companies that own drilling rigs and provide equipment and field services to the producers are most prone to consolidation during bear markets, Piazza said. During the last crude slump in 2009-10, 247 oilfield-services deals with a combined value of $32 billion dwarfed the 51 transactions among oil producers, which amounted to just $6.6 billion, he said.
Blackstone, Carlyle
Money is certainly waiting in the wings for a flurry of acquisitions. The world’s four largest buyout firms, including Blackstone Group LP and Carlyle Group LP, have amassed a $30 billion war chest for deals.
“This is one of the best periods, if not the best, to invest in global energy,” said Marcel van Poecke, head of Carlyle International Energy Partners.
Piazza of Bloomberg Intelligence said the biggest oil companies are more likely to snatch up individual assets and business units of smaller rivals, rather than acquire entire corporations. Exxon Mobil Corp. is among buyers indicating they’re particularly interested in acquiring drilling assets that expand on their existing oilfields.
For those companies with an appetite for wholesale corporate takeovers, the best approach may be to bide their time, said Jack A. Bass tax strategist .
“You’re not going to lose anything by waiting,” Jack A. Bass advises clients. “You’ll probably get it cheaper a few months from now.”

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